Viaderma Inc (OTCMKTS:VDRM) took a bit of a hit recently based on the surfacing of some litigation related to the delivery method associated with its lead asset. Over the last few days, however, the company has recovered much of the lost ground, trading up to the tune of around 20% on the Monday open at current prices (midsession on Wednesday) and up close to 10% for the day so far.

With the potential for an FDA green light for its lead registration asset just around the corner, and the company fresh off the back of what was reported as being a successful conference presentation by its CEO relating to the lead target indication – diabetic foot ulcer therapy – it looks as though we could be in for some strength. The litigation dampens sentiment somewhat, however, right now, but a little bit of digging reveals that sentiment need not be impeded by what’s going on.

Here is why.

By way of a bit of background, Viaderma has developed a topical antibacterial formulation of an already FDA registered drug, which it has been able to prove in trials has the potential to treat diabetic foot ulcers successfully in more than 90% of applications. This category of condition is crying out for fresh therapy options right now, and a number of companies have failed in their attempts to bring said options to market just recently. We covered this company not long ago, requesting that management put out some degree of insight (by way of a press release or otherwise) as to how the above-mentioned presentation went. To put it bluntly, we felt that the claims made as to the 90% success rate in this indication were too good to be true, and wanted to see how the scientific community responded to said claims.

Shortly after our coverage, we got exactly what were looking for, with this release.

The product is in final testing for manufacturing, and based on the available evidence, should be a shoo-in for a quick transition toward standard of care therapy in this sector. So what’s holding the company back? Well, as mentioned, there is a claim against the technology that underpins the product.

Specifically, one of the guys who worked on a product (a patent lawyer) with the current CEO and the technology’s initial inventor (a scientist) claims to have ownership rights. If this is the case, it’s potentially terminal for the program. However, it doesn’t take too much digging to prove that the claim is essentially baseless.

Head over to this site.

Insert the following into the field as an application number: 13/729776.

This is the application number for the patent that the guy we’re talking about is trying to challenge – his name is Steven Keough and he’s listed as an inventor on the patent, along with D. Howard Phillips.

Check the status of the patent:

” Abandoned — Failure to Respond to an Office Action”

So first of all, the patent isn’t even a patent – it’s an application.

More important that that, however, it has been abandoned. When a patent application gets abandoned it’s as if nothing has ever been filed. Even if an individual is listed as an inventor on the application, his or her rights to any return based on future commercial application of the technology covered by the initial application are non-existent.

This is all based on a bit of research in a murky area – we aren’t patent lawyers and we don’t work at the USPTO. We may be misinterpreting something (although we’re pretty certain we aren’t), so we’re going to say that it’s important for anyone thinking about acting on our coverage to do a bit of due diligence before doing so.

All said, however, this just looks like a bit of opportunism from Keough.

If that’s the case, then, our bull thesis remains firm, and our attention returns to the science (and the therapeutic application) as near term value inputs.

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Disclosure: We have no position in VDRM and have not been compensated for this article